June 29, 2011

WHAT’S GOING ON with Greece’s austerity budget. “Papandreou is passing these cuts because these cuts are what is necessary to get external institutions, like the EU and the IMF, to keep funding his primary deficit. If he refused, the financing would dry up, and Greece would be forced to make even deeper cuts. They would also have to try to raise more revenue with higher taxes, but this is very difficult in Greece, where compliance is low and the officials in charge of collecting your taxes are generally quite corrupt.” Well, when the officials in charge of tax-collection are perceived as corrupt, compliance tends to be low. That’s a lesson that applies everywhere.